“What is a Bankable Project” - UNECE Homepage · “What is a Bankable Project” ... Project...

55 King William Street

London, EC4R 9AD

United Kingdom conning.com

“What is a Bankable Project”

International Training Course On Business

Planning 2nd Training Session

20-21 June 2013

Conning Asset Management Limited

Authorised and regulated by the Financial Conduct Authority

1

International Training Course On Business Planning 2nd Training Session

20-21 June 2013

Conning

Who we are…

Founded in 1912; insurance specialists for more than 100 years; investing insurance assets for nearly 3 decades

Managing $85.8 billion for 129 clients*

279 employees with locations in Hartford, Purchase, London, Cologne and Hong Kong

Independently owned by Aquiline Capital Partners, Conning employees, and Cathay Financial Holdings

*As of 3/31/2013 Includes Conning Inc., Conning Asset Management Limited, Cathay Conning Asset Management Limited, and Goodwin Capital Advisers, Inc.

** Includes Agencies, Taxable Municipals and Government related assets

*** Includes Convertible and High Yield Securities

Assets by Security Class* Assets by Client Type*

$ 11.8 Mortgage-backed Securities

$ 3.3 Asset Backed Securities

$ 7.1 Tax-Advantage Securities

$ 3.3 US Treasury

$ 2.5 Equity Products

$ 1.1 Private Placements

$ 2.6 Non U.S. Gov't and Agencies

$ 3.9 Short Term

$ 6.0 U.S. Gov't Sponsored Assets**

$ 44.2 Corporate Bonds***

48% Life

3% Pension

1% Other

3% Health

45% Property Casualty

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20-21 June 2013

Conning - European Overview

14 clients – Insurance Companies, Lloyd’s Agencies & Pension Funds

$8.3 billion in Asset under Management for European domiciled clients of which $6.3 billion is managed out of our

London Investment centre*

Full client service including

Input into ICA/ Solvency II

Extensive knowledge of Trust requirements, custodians, documentation etc.

Lloyd’s reporting – LIM/QMR

Assets by Client Type*

3% Life

19% Pension

78% Property Casualty

Assets by Currency**

$ 1,506 Sterling

$ 1,405 Euro

$ 440 Other Currencies

$ 4,930 U. S. Dollar

*As of 3/31/13 Includes Conning Inc. and, Conning Asset Management Limited

**USD equivalent, in millions

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20-21 June 2013

Introduction to Conning: Platform Overview

Investment Capabilities

High Yield

Private Placements

Convertibles

Supply Chain Finance

Commercial Mortgage Loans

High Dividend Income Equity

Replication Strategies

Exchange Traded Funds (ETF)

Publically Traded, Investment Grade Securities Specialty Asset Classes

Equity Non-USD Investment Grade Securities

U.S. Treasury / U.S. Agency Bonds

Treasury Inflation-Protected Securities (TIPS)

U.S. Corporate Bonds

Mortgage Back Securities

Commercial Mortgage Back Securities

Asset Backed Securities

Municipal Securities (Taxable and Tax-Exempt)

Foreign Government / Provincial / Corporate Bonds

Government Bonds

Agency Bonds

Covered Bonds

Inflation-linked Bonds

Investment Grade Corporate Bonds

AUM Growth (USD Billions) as of March 31, 2013

Source: Conning

*As of 3/31/13 Includes Conning Inc., Conning Asset Management Limited, Cathay Conning Asset Management Limited, and Goodwin Capital Advisers, Inc.

$27.6

$85.8

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q 13

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20-21 June 2013

UNECE - What is a Bankable Project?

start

All parties

share profits

Long term contracts

Owner/Operators

Proven technology/

equipment

Sector

Sound

economics

Country Country

Sector

Country

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20-21 June 2013

UNECE - Where is project – country?

continue IF NOT, IT CANNOT BE CONSIDERED END

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20-21 June 2013

UNECE – Does the sector qualify?

For example, for power projects is it renewable or clean?

For energy efficiency, does it reduce energy consumption or

shift time of use?

Types of renewable and clean projects: Wind energy, solar energy, hydro-electric, biomass,

cogeneration, combined-cycle, fuel switching, geothermal, clean coal, waste-to-energy, district

heating and electric, waste fuel, combined heat & power (CHP), efficiency retrofit and related

projects and companies.

continue IF NOT, IT CANNOT BE CONSIDERED end

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20-21 June 2013

UNECE - What is the technology?

Is it a known and proven technology?

Is it used by others successfully?

Is it built by a creditworthy firm?

Are the supplier warranties creditworthy?

IF NOT, IT CANNOT BE CONSIDERED end continue

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20-21 June 2013

UNECE - Who is the owner / operator?

Is the owner/operator experienced in the sector?

Are they financially viable as an operator?


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20-21 June 2013

UNECE - Who are the project owners?

Will they invest in the project?

Do they have experience with similar project technology?

Do they have experience in the region?

Do they have a financial incentive to meet/improve on

the base case?


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20-21 June 2013

UNECE - Is there a cash generation source?

Is there a long term off take contract in place?

Does the contract allocate economic and operational

risks fairly?

Is the payer creditworthy?


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20-21 June 2013

UNECE - Project Selection

A project which reaches

this stage

should be bought forward!

NOW THE ISSUE BECOMES HOW …

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20-21 June 2013

UNECE – What happens next?

A project description is needed

A financial model will be requested

What is a project description?

What is a financial model?

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20-21 June 2013

UNECE - What is a project description?

A detailed written description, including the following

The country and location of the project

The sector and how the project fits into the sector

The technology used by the project

Description of the owner/operators

Track record of the operators

Description of the long-term cash generating contracts

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20-21 June 2013

UNECE - What is a financial model?

Summary of the project economics

Revenue

Contracted revenues

Tax incentives

Potential incremental revenue

Expenses

Operations and maintenance Management & employees

Parts, overhaul / replacement account

Fuel

Taxes

Rent/Lease

Cost of Financing

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20-21 June 2013

UNECE – Debt Characters

Senior Debt:

Has fixed repayment amounts

Has fixed repayment dates

Has a fixed term

Mezzanine Debt:

Has unknown repayment amounts

Has a fixed term

Has minimum repayment amounts

Equity:

Has unknown dividend payments

Has an unknown term

Has unknown residual value

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20-21 June 2013

UNECE - Self Amortisation

What is self amortisation?

Self amortisation is the single most important factor which

allows for the financing of a project to happen, as it defines

the base case while it allows for up-side events like an IPO*

or trade sale

The project generates cash sufficient to repay its debts and provides as acceptable return to equity

without a sale or other exceptional event or improvement in contractual terms.

* IPO = Initial Public Offering of shares in a company

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20-21 June 2013

UNECE - What is IRR?

It allows a project to happen

It grants flexibility to the debt financing

It meets investor needs i.e. long-term but worthwhile returns

It is not expensive; market rates ensure competitors don’t step in

It has advantages over equity finance, which can be expensive

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20-21 June 2013

UNECE – What is IRR?

-IN + C1 + C2 + Ct = 0

(1+IRR)1 (1+IRR)2 (1+IRR)t

EUR7m + C1 + C2 + Ct

(1+17%)1 (1+17%)2 (1+17%)t = 0

Where C is the post-debt servicing free cash flow.

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20-21 June 2013

UNECE – Who produces the project document ?

Development Banks Senior Lenders

Mezzanine & Equity Fund

PROJECT

Gap Gap

Gap

Project document development support is key to promote bankable projects

Targeted training could be used to maximum effect here

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20-21 June 2013

UNECE – Who coordinates which comes first ?

Project Description

(qualitive)

III II

I • Feasibility Studies

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20-21 June 2013

UNECE – The UNECE Solution

Pipeline

Development

Financing

Coordination

Unit

Technical

Finance

Co

nsu

ltan

ts

Development Finance Senior Lenders Mezzanine Funds Investment

Decisions

IG IG IG

NC NB CB NC NB CB NC NB CB NC NB CB NC NB CB NC NB CB NC NB CB NC NB CB NC NB CB NC NB CB NC NB CB NC NB CB

Project

Doc

Project

Doc

Project

Doc

Project

Doc

Project

Doc

Project

Doc

Project

Doc

Project

Doc

Project

Doc

Project

Doc

Project

Doc

Project

Doc

ALB BLR BIH BGR HRV KAZ MDA ROM RUS MKD UKR SCG

NC NB CB

NC = UNECE National

Coordinator

NB = National Bank/ Ministry

of Finance/Ministry of

Energy

CB = Commercial Bank

● Project Doc = Project Document

● IG = Investment Guidelines

UNECE

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20-21 June 2013

UNECE - Why investor demand is strong

Renewable Energy &

Energy Efficiency

(Climate Change Mitigation)

Private Equity

(Long Term Investments)

Socially

Responsible

Investments

Energy

(Niche-Generation

Demand Management)

Participating

Countries

(Higher Returns)

Infrastructure

(Anti-cyclical in nature)

Fund meets

several

investor needs

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20-21 June 2013

UNECE - Conclusion

National economies benefit from greater supply efficient i.e. lower cost

Society benefits from good resource allocation, more from less

Efficient regulatory structures permit more projects to be built

Efficient financial structures encourage asset transfers to the most

efficient operators

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20-21 June 2013

Websites – UNECE & FEEI

www.feei.info

http://www.unece.org/energyefficiency.html

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20-21 June 2013

Disclaimer

This document is prepared and issued by Conning Asset Management Limited (“CAML”). The information contained in this document is

confidential and is intended solely for the recipients to whom it is transmitted by CAML.

The information in this document is not and should not be construed as any advice, recommendation or endorsement from CAML to any

legal, tax, investment or other matter. Nothing in this document constitutes an offer to deal in investments, to buy or sell any security, future,

option or other financial instrument, to provide advisory services or to form the basis of any contract or contractual obligation. This document

is not to be reproduced or used for any purpose other than the purpose for which this document was prepared and transmitted by CAML. It

should not be distributed to or used by any persons other than the intended recipients without the prior consent of CAML.

CAML is authorised and regulated by the Financial Conduct Authority.

CAML is a member of the Conning group of companies and may provide investment management and advisory services together with group

companies in the United States of America, Ireland, Germany and Hong Kong. Such clients may not have the benefit of rights designed to

protect investors under the regulatory system of the United Kingdom.

Any statistics contained within this document have been compiled in good faith and do not constitute a forecast, projection or illustration of the

future performance of investments. The past performance of investments is not necessarily a guide to future returns. Values of investments

may fall as well as rise, and changes in rates of exchange may cause the value of investments to rise or fall in value, such that investors may

not receive full return of capital invested.

The information contained in this document is compiled from internal and other sources which we consider to be reliable or are expressions

of our opinion. Whilst every effort has been made to ensure that the information is correct at the date of publication, CAML does not

guarantee the accuracy or completeness of the information. Recipients of this document need to evaluate the merits and risks of the

information provided. Decisions based on the information contained within this document are the sole responsibility of the recipient. With the

exception of statutory obligations, CAML, its Directors, officers and employees accept no liability whatsoever for any loss or damage which

may arise in relying on any opinion, expression or conclusion contained within this document, its content or otherwise arising in connection

with this document.

ADVISE®, FIRM®, and GEMS® are registered trademarks of Conning, Inc.

Registered in England No. 3654447

FCA Firm Reference Number: 189316 Registered Office : 55 King William Street, London, EC4R 9AD

C11#1681044

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20-21 June 2013

Conning - Contact Details

Markus van der Burg

Alternative Investments

Tel: + 44 20 7337 1931

Fax:+ 44 20 7337 1941

E-mail: [email protected]

Conning Asset Management Limited

55 King William Street

LONDON EC4R 9AD

United Kingdom

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